PagerDuty, Inc. (NYSE: PD) (“PagerDuty”) today announced the
pricing of $350 million principal amount of 1.50% Convertible
Senior Notes due 2028 (the “notes”) in a private placement (the
“offering”) to persons reasonably believed to be qualified
institutional buyers pursuant to Rule 144A under the Securities Act
of 1933, as amended (the “Securities Act”). PagerDuty also granted
the initial purchasers of the notes an option to purchase up to an
additional $52.5 million principal amount of notes. The sale of the
notes is expected to close on October 13, 2023, subject to
customary closing conditions.
The notes will be senior unsecured obligations of PagerDuty and
will accrue interest payable semiannually in arrears on April 15
and October 15 of each year, beginning on April 15, 2024, at a rate
of 1.50% per year. The notes will mature on October 15, 2028 unless
earlier converted, redeemed or repurchased. The initial conversion
rate of the notes will be 36.5647 shares of PagerDuty’s common
stock per $1,000 principal amount of such notes (equivalent to an
initial conversion price of approximately $27.35 per share). The
initial conversion price of the notes represents a premium of
approximately 27.5% over the last reported sale price of
PagerDuty’s common stock on the New York Stock Exchange on October
10, 2023. Upon conversion, PagerDuty will pay cash up to the
aggregate principal amount of the notes to be converted and pay or
deliver, as the case may be, cash, shares of PagerDuty’s common
stock or a combination of cash and shares of PagerDuty’s common
stock, at PagerDuty’s election, in respect of the remainder, if
any, of PagerDuty’s conversion obligation in excess of the
aggregate principal amount of the notes being converted.
PagerDuty may not redeem the notes prior to October 20, 2026.
PagerDuty may redeem for cash all or any portion of the notes
(subject to certain limitations), at its option, on or after
October 20, 2026 and prior to the 61st scheduled trading day
immediately preceding the maturity date, if the last reported sale
price of PagerDuty’s common stock has been at least 130% of the
conversion price then in effect for at least 20 trading days
(whether or not consecutive) during any 30 consecutive trading day
period (including the last trading day of such period) ending on,
and including, the trading day immediately preceding the date on
which PagerDuty provides notice of redemption at a redemption price
equal to 100% of the principal amount of the notes to be redeemed,
plus accrued and unpaid interest to, but excluding, the redemption
date.
If PagerDuty undergoes a “fundamental change” (as defined in the
indenture that will govern the notes), then, subject to certain
conditions and limited exceptions, holders may require PagerDuty to
repurchase for cash all or any portion of their notes at a
repurchase price equal to 100% of the principal amount of the notes
to be repurchased, plus accrued and unpaid interest to, but
excluding, the fundamental change repurchase date. In addition,
upon certain corporate events that occur prior to the maturity date
of the notes or if PagerDuty delivers a notice of redemption in
respect of some or all of the notes, it will, under certain
circumstances, increase the conversion rate of the notes for
holders who elect to convert their notes in connection with such a
corporate event or convert their notes called (or deemed called)
for redemption during the related redemption period, as the case
may be.
PagerDuty estimates that the net proceeds from the offering will
be approximately $339.4 million (or $390.4 million if the initial
purchasers exercise their option to purchase additional notes in
full), after deducting the initial purchasers’ discount and
estimated offering expenses payable by PagerDuty. PagerDuty expects
to use a portion of the net proceeds from the offering to pay the
cost of the capped call transactions that it entered into as
described below. Additionally, PagerDuty expects to use a portion
of the net proceeds from the offering to repurchase for cash
certain of its 1.25% Convertible Senior Notes due 2025 (the “2025
notes”) and shares of PagerDuty’s common stock, each as described
below. PagerDuty intends to use the remainder of the net proceeds
for working capital or other general corporate purposes, which may
include potential acquisitions and strategic transactions. If the
initial purchasers exercise their option to purchase additional
notes, PagerDuty expects to use a portion of the net proceeds from
the sale of the additional notes to enter into additional capped
call transactions and the remainder of such net proceeds for
working capital or other general corporate purposes, which may
include potential acquisitions and strategic transactions. From
time to time, PagerDuty evaluates potential strategic transactions
and acquisitions of businesses, technologies or products.
In connection with the pricing of the notes, PagerDuty entered
into privately negotiated capped call transactions (the “capped
call transactions”) with certain of the initial purchasers or their
respective affiliates and other financial institutions (the “option
counterparties”). The capped call transactions cover, subject to
customary adjustments, the number of shares of PagerDuty’s common
stock that will initially underlie the notes. The capped call
transactions are expected to offset the potential dilution to
PagerDuty’s common stock as a result of any conversion of notes,
with such reduction subject to a cap. The cap price of the capped
call transactions relating to the notes will initially be $42.90,
which represents a premium of 100% over the last reported sale
price of PagerDuty’s common stock on the New York Stock Exchange on
October 10, 2023, and is subject to certain adjustments under the
terms of the capped call transactions. If the initial purchasers
exercise their option to purchase additional notes, PagerDuty
expects to enter into additional capped call transactions with the
option counterparties.
In connection with establishing their initial hedges of the
capped call transactions, PagerDuty expects that the option
counterparties and/or their respective affiliates may enter into
various derivative transactions with respect to PagerDuty’s common
stock and/or purchase PagerDuty’s common stock in secondary market
transactions concurrently with or shortly after the pricing of the
notes, including with certain investors in the notes. This activity
could increase (or reduce the size of any decrease in) the market
price of PagerDuty’s common stock or the notes at that time.
In addition, PagerDuty expects that the option counterparties
and/or their respective affiliates may modify or unwind their hedge
positions by entering into or unwinding various derivative
transactions and/or purchasing or selling PagerDuty’s common stock
or other securities of PagerDuty in secondary market transactions
following the pricing of the notes and prior to the maturity of the
notes (and are likely to do so on each exercise date of the capped
call transactions, which are scheduled to occur during the
observation period relating to any conversion of the notes on or
after June 15, 2028 that is not in connection with a redemption, or
following PagerDuty’s election to terminate any portion of the
capped call transactions in connection with any repurchase,
redemption, exchange or early conversion of the notes). This
activity could also cause or avoid an increase or a decrease in the
market price of PagerDuty’s common stock or the notes, which could
affect a noteholder’s ability to convert its notes and, to the
extent the activity occurs during any observation period related to
a conversion of notes, it could affect the amount and value of the
consideration that a noteholder will receive upon conversion of its
notes.
PagerDuty expects to use approximately $224.5 million of the net
proceeds from this offering to repurchase for cash $230.0 million
aggregate principal amount of its 2025 notes, including accrued and
unpaid interest on the 2025 notes, concurrently with the pricing of
the offering in privately negotiated transactions effected through
one of the initial purchasers or one of its affiliates (each, a
“note repurchase transaction”). The offering is not contingent upon
the repurchase of the 2025 notes. In connection with any note
repurchase transaction, PagerDuty expects that holders of the 2025
notes who agree to have their 2025 notes repurchased and who have
hedged their equity price risk with respect to such notes (the
“hedged holders”) will unwind all or part of their hedge positions
by buying PagerDuty’s common stock and/or entering into or
unwinding various derivative transactions with respect to
PagerDuty’s common stock. The amount of PagerDuty’s common stock to
be purchased by the hedged holders may have been substantial in
relation to the historic average daily trading volume of
PagerDuty’s common stock. This activity by the hedged holders could
increase (or reduce the size of any decrease in) the market price
of PagerDuty’s common stock, including concurrently with the
pricing of the notes, and may have increased the initial conversion
price of the notes. In addition, in connection with any repurchases
of the 2025 notes, PagerDuty may elect to terminate portions of the
capped call transactions that it entered into in connection with
the issuance of the 2025 notes (the “existing capped call
transactions”). In connection with such terminations, the
counterparties to the existing capped call transactions may unwind
various derivatives and/or sell PagerDuty’s common stock or other
securities of PagerDuty in the secondary market following the
pricing of the notes, which could affect the market price of
PagerDuty’s common stock and the notes.
PagerDuty also expects to use approximately $50.0 million of the
net proceeds from the offering to repurchase for cash shares of
PagerDuty’s common stock from purchasers of notes in the offering
at a purchase price per share equal to the last reported sale price
per share of PagerDuty’s common stock on October 10, 2023, which
was $21.45 per share, concurrently with the pricing of the offering
in privately negotiated transactions effected through one of the
initial purchasers or one of its affiliates. The offering is not
contingent upon the repurchase of PagerDuty’s common stock. These
repurchases could increase (or reduce the size of any decrease in)
the market price of PagerDuty’s common stock or the notes. In the
case of repurchases effected concurrently with the offering, this
activity could have affected the market price of PagerDuty’s common
stock prior to, concurrently with or shortly after the pricing of
the notes, and could have increased the initial conversion price
for the notes.
Neither the notes, nor any shares of PagerDuty’s common stock
issuable upon conversion of the notes, have been registered under
the Securities Act or any state securities laws, and unless so
registered, may not be offered or sold in the United States or to,
or for the account or benefit of, U.S. persons, absent registration
or an applicable exemption from, or in a transaction not subject
to, the registration requirements of the Securities Act and other
applicable securities laws.
This press release is neither an offer to sell nor a
solicitation of an offer to buy any securities, nor shall it
constitute an offer, solicitation or sale of any securities in any
state or jurisdiction in which such offer, solicitation or sale
would be unlawful prior to the registration or qualification under
the securities laws of any such state or jurisdiction.
About PagerDuty
PagerDuty, Inc. (NYSE:PD) is a global leader in digital
operations management. The PagerDuty Operations Cloud
revolutionizes how critical work gets done, and powers the agility
that drives digital transformation. Customers rely on the PagerDuty
Operations Cloud to compress costs, accelerate productivity, win
revenue, sustain seamless digital experiences, and earn customer
trust.
Forward-Looking Statements
This press release contains “forward-looking” statements, as
that term is defined under the federal securities laws, including
statements concerning the closing of the offering of the notes and
capped call transactions, the note repurchase transactions or the
share repurchases, the potential impact of the foregoing or related
transactions on dilution to holders of our common stock, the market
price of our common stock or the notes, and the anticipated use of
proceeds from the offering. Forward-looking statements are subject
to a number of risks and uncertainties, many of which involve
factors or circumstances that are beyond our control. Our actual
results could differ materially from those stated or implied in
forward-looking statements due to a number of factors, including
but not limited to, whether we will consummate the offering of
notes, the note repurchase transactions or the share repurchases on
the expected terms or at all, each of which could differ or change
based upon market conditions or for other reasons, and the other
risks detailed in our Form 10-K filed with the Securities and
Exchange Commission (“SEC”) for the year ended January 31, 2023, in
our quarterly report on Form 10-Q for the quarter ended July 31,
2023 and in other filings and reports that we may file from time to
time with the SEC. The forward-looking statements included in this
press release represent our views as of the date of this press
release. We anticipate that subsequent events and developments will
cause our views to change. We undertake no intention or obligation
to update or revise any forward-looking statements, whether as a
result of new information, future events or otherwise. These
forward-looking statements should not be relied upon as
representing our views as of any date subsequent to the date of
this press release.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20231010359298/en/
Investor Relations Contact: Tony Righetti
investor@pagerduty.com
SOURCE PagerDuty
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